Savvy retailers are developing recovery plans and strategies in light of potential risk from hurricanes, floods and power outages. Though store locations can be greatly affected by disasters, the rise of mobile and online buying presents retailers with a whole new level of risk.
During an in-depth interview with Retail TouchPoints, Rich Cocchiara, IBM Distinguished Engineer and Chief Technology Officer of Business Continuity and Resiliency Services, shared how merchants can better mitigate risk online and in stores. Cocchiara also revealed how best-in-class retailers are turning to the cloud to optimize data backup and IT management in light of potential risks.
Retail TouchPoints (RTP): How has awareness of resiliency technology increased during 2011?
Advertisement
Rich Cocchiara: I think 2011 was a big wake-up call for a lot of retailers, particularly those companies in the U.S. and Japan, where hurricanes, earthquakes and floods were a major threat. Retailers within these areas realized they need to be aware and prepared for what can happen.
Furthermore, most retailers were primarily concerned about “keeping the lights on” to ensure customers could go to locations. Although that was once the most vital factor, customers now are shopping online more, which is making retailers more dependent on specific days that increase web traffic, such as Black Friday and Cyber Monday.
With these factors in mind, retailers must understand that there are several levels of risk that can occur in store and online. For example, natural disasters, such as Hurricane Irene, can affect individual stores but also disturb online storefronts by slowing supply chains.
RTP: Are supply chains becoming more susceptible to risk?
Cocchiara: The supply chain has changed. Most retailers thought they could weather a momentary “blip” at a store because they had several stores with an array of products on hand, but they can’t do that anymore. Everything is very automated. Today’s retailers are not only ringing you up, they’re managing inventory in real time, and tracking and contributing to customer analytics. If companies lose this information, the available items and sales projections for the following week will be shifted. As a result, companies need to be more prepared. They no longer can accept and adapt to the momentary outages.
In the last ten years, retailers have been more focused on their web presence. But now, with analytics becoming more vital to retailer success, in-store resiliency systems are coming to the forefront.
RTP: Are there any specific resiliency trends you’ve noticed among your retail clients?
Cocchiara: We’re seeing a lot of retailers analyzing risk to their IT operations, which affects their online presence. A lot of merchants also are analyzing risk to their distribution centers and individual stores. Now, companies are thinking about risk holistically and are planning ahead. For example, retailers are determining potential impact on locations, distribution and IT as a whole, and how it can affect sales and marketing strategies. Then they are developing plans that are quick to execute in light of a potential disaster.
For example, if a hurricane is coming up the east coast, a retailer can analyze and predict if, and how many, stores will be affected. Marketers then can send out mass emails to consumers within a specific area to let them know they can still order specific products online. IBM business continuity and resiliency services allow retailers to do this, as well as test risk mitigation in specific areas.
RTP: With an increased focus on web presence, are there any changes to “types” of risk?
Cocchiara: Retailers now are characterizing risk in two ways: “positive risk” and “negative risk.” While “negative risk” is characterized as natural disasters such as hurricanes, floods, etc., “positive risk” is sudden spikes in online traffic and the available scalability and capacity to absorb it. For example, would a retailer be able to manage and handle traffic if its competitor’s site failed?
Today’s retailers focus too much on the “negative risk,” in my opinion. “Positive risk” is good for company income, but the key is taking advantage of it and managing it effectively, or it will become a negative quickly.
Retailers still have very tight profit margins, but now can turn to the cloud to create a central source for their preventative tactics.
RTP: Can you provide an example of an optimal cloud strategy?
Do you think more retailers will be moving data and risk mitigation information to the cloud come 2012?
Cocchiara: A good example is if a retailer provides back-up information and data in the cloud. Retailers also can utilize virtual servers in a cloud environment. In other words, if a retailer experiences a situation where it needs multiple servers, it can go into the cloud, as can an entire IT operation.
Retailers also can back up customer data and business analytics in the cloud. This whole evolution of resilience provides retailers with additional risk mitigation. The beauty of the cloud is there is a lot more flexibility in terms of functionality and options.
During 2012, I definitely think retailers will grow more comfortable tapping into the cloud. I also think data backup and archiving will be making that transition at a more rapid pace.
RTP: How has the rise of the cross-channel shopper altered retailers’ resiliency expectations?
Cocchiara: Today’s shoppers want to shop at any time and through any device they desire. They’re very used to getting online via their iPad, iPhone and BlackBerry and ordering on the bus, train or anywhere they want. The ability to address this growing market is critical. Retailers that can ensure continued operations and consistency will be the ones to succeed.
RTP: Overall, are there any tips or best practices you can provide in terms of developing a risk mitigation strategy?
Cocchiara: There’s a three-step process IBM always advises its clients to follow:
1. Have a plan: Retailers must review current risk strategies and conduct an analysis of potential new issues that can occur within the network.
2. Ensure backup capability: It is vital that retailers have the storage and network capacity and scalability to alleviate risk.
3. Test it: Many retailers fail to either test their resiliency strategies or test them effectively. We encourage our clients to test their risk strategies realistically and sporadically. Employees shouldn’t be aware of when a test is going to occur, since real disasters and outages don’t announce themselves. The more realistic the test, the better retailers can determine preparedness.
Richard Cocchiara is an IBM Distinguished Engineer and the Chief Technology Officer for Business Continuity and Resiliency Services at IBM Global Services, specializing in helping customers drive higher business resiliency in order to realize increased business availability. He has over 28 years of I/S experience and has performed consulting engagements to many fortune 500 companies.
